In a comment to this post, reader Westmorlandia offered the following:
I usually prefer “on behalf of” when talking about execution, as otherwise some lawyer will try to argue that a contract signed through agency (almost always the case with companies) was not signed “by” the company.
So, the question is, would there be any benefit to saying “signed on behalf of Acme” rather than “signed by Acme”? Would your answer depend on whether the person signing for Acme was (1) the CEO, (2) the CEO of a member, or (3) someone with a power of attorney?
Life would be simpler is you could use by regardless of whether the party is an individual or an entity. So the question is whether anyone has ever halfway plausibly argued that a given contract didn’t comply with some requirement or other because it was signed by an agent of Acme and the requirement referred to signature “by” Acme?
9 thoughts on ““By” Versus “On Behalf Of””
Thanks Ken – I will also be interested to see whether anyone has any views on this. It is one of those principles that I have long understood to be technically correct, but in honesty have never given a huge amount of thought to.
Just to add some background, the UK Companies Act 2006 (s. 43) says that “a contract may be made:
(a) by a company, by writing under its common seal, or
(b) on behalf of a company, by a person acting under its authority, express or implied.”
Subsection (a) is later expanded on in s.44 – signature by any two directors (or a director and the secretary), or a witnessed signature by a director, are deemed to have the same effect as execution under the common seal. In practice, I don’t see seals used much, if ever – almost all contracts and other documents that I see signed/executed are done by a person somehow authorised to do so by the company (i.e. under subsection (b)).
This is obviously a UK law, but it wouldn’t surprise me if the distinction survives in other common law jurisdictions too.
Of course, none of this means that a contract specifying that a document had to be signed “by” a company would be held to mean only execution in accordance with (a) (or the equivalent in other jurisdictions). I don’t believe the argument would succeed, but on principle I would prefer to be right if the distinction exists.
W: Of course, the whole notion of contracts under seal is a misbegotten relic from olden times. It seems to be entrenched in England; in the U.S., about two thirds of the states have done away with the distinction. Ken
Speaking of contracts under seal, the Marx Brothers in Horsefeathers use a seal (in a very literal sense) when Harpo and Chico (as I recall) sign a contract to play football for Groucho’s college. The scene is hilarious.
The only time I really worried about this, I used a signature block like the following:
This worked for that one situation.
I was about to make the same point as Westmorlandia, but he saved me the trouble of checking the Companies Act.
Conventional practice in England is to sign contracts “on behalf of” the company. “By” the company is very rarely encountered, despite section 43(a).
Signature blocks in US contracts sometimes use “by” in the sense of “Acme Corp …. By Dr Seuss…/signed/” which to my mind is not the same as saying “By Acme Corp …./signed/”. I think the first of these alternatives is another way of saying “acting through the agency of Dr Seuss”, while the second is applying the signature of Dr Seuss as the signature of the company.
Ken, I note that you use the words “for” and “as agent of” toward the end of your posting; these words potentially signal a third category, distinct from “by” and “on behalf of”. Sometimes, English contracts are signed “for and on behalf of” the company, which raises the question of the distinction between “for” and “on behalf of”. I am uncertain whether there is any distinction, and in recent years have tended to say just “on behalf of”, but one approach is to view “on behalf of” as a reference to someone who has internal authority to sign as the human embodiment of the company (eg the CEO), while “for” suggests a more general agency authority (eg that held by someone who has a power of attorney).
My view is that it is better to replace trios such as “by, for and on behalf of” with just one of these three expressions, and that “on behalf of” is probably the best one to use from an English law perspective. However, I suspect the US preference may be to use “by”.
In 15 years I have never had anybody raise the issue of whether a contract was effectively executed, much less split hairs over “by” or “on behalf of”. It seems to me that a signature block like:
coupled with the effective date and parties from the first paragraph (this is after all the closing to that first paragraph) of the agreement would be sufficient to bind the company. Assuming that the corporate formalities such as delegation of signing authority have been maintained, this would establish the who, whether it is for a company or a group of companies, the effective date, head office, the person signing and the indicia of their authority. Other than cases where the signing authority is horribly complex (recalling CDO/CLO structures of old) is there really any magic to voluminous signature blocks?
On the question of signing for more than one legal entity, UK company law section 44(6), Companies Act 2006, now requires separate signing for each entity: “Where a document is to be signed by
a person on behalf of more than one company, it is not duly signed by
that person for the purposes of this section unless he signs it
separately in each capacity.”http://www.legislation.gov.uk/ukpga/2006/46/section/44
Elliot: I think that Westmorlandia had in mind that this issue might arise not in signature blocks, but instead when a party complains that a given signature didn’t comply with a contract requirement because it wasn’t signed “by” a given entity but instead “on behalf” of that entity. Ken
Yes, there can be particular legal reasons for certain execution practices outside the norm that I proposed. In looking at the original post, this issue didn’t seem to revolve around circumstances such as whehter the Companies Act allows for one signture on behalf of a group of companies. Your point though is well taken.